Potential COVID-19 Treatment Pushes Rates Higher Across the Curve

 

Stocks hit new records, rates climb as Trump administration hints at new vaccine.  The S&P 500 rose 1% to close at another record high on the news that the Trump administration is considering expediting the use of an experimental COVID-19 vaccine from the UK. The Nasdaq Composite would also hit a record high- climbing 0.6% to end at its 37th record close of 2020 while the DJIA rose 1.4%, roughly 4% below its all-time high hit in February.  Treasury yields and swap rates rose on the day and are sharply higher this morning on the news that US and China are making progress on their “phase-one” trade deal. The 10-year Treasury yield is sitting 5 basis points higher on the day at 0.70%.  

 

 

A potential COVID-19 treatment and vaccine could be fast-tracked.  Over the weekend, the FDA announced that they are working to expand access to a potential virus treatment for more serious cases.  The treatment would utilize antibodies from recovered virus patients, but the FDA has chosen to review more evidence before moving forward.  Separately, the Trump administration is exploring ways to expedite access to a new experimental vaccine created by AstraZeneca and Oxford University.  The vaccine is currently in Phase 3 trials with mass distribution on the timeline only for early next year.  As lawmakers deliberate on the best course of action, US infections have been trending downwards the past few days.  The number of new cases touched its lowest level in over two months on Sunday, marking the ninth consecutive day of less than 50,000 new daily cases.  Meanwhile, virus cases are rising across Europe with Spain experiencing the brunt of the resurgence.  After cases fell to less than 300 per day, officials in Spain are recording over 5,000 new cases a day. 

 

 

Hurricanes sway energy trading this week.  Hurricanes Marco and Laura are two Category 3 tropical storms that have slowly been moving westward.  They are both moving towards the south of Cuba but could hit anywhere from Texas to Florida over the next three days.    Over 15% of US oil is produced in the Gulf Coast, with almost half of the refineries located there.  Investors are forecasting factory shutdowns and a volatile trading week ahead.  The news pushed gas futures for delivery in September up by 6.5%, the largest single-day rise since March.  US crude rose 0.7% while Brent crude rose 1.8% on the day.